*Smaller IT vendors feel the pinch of global meltdown * **
** ** *Low volumes, pricing pressure drag down sequential growth. * *Vishwanath Kulkarni Shamik Paul * Bangalore, Jan. 29 The economic downturn has impacted the small and mid-sized IT firms more than their larger counterparts as evident in the rather sluggish sequential growth for the December quarter. Factors such as currency volatility coupled with low volumes and pricing pressure dragged down the sequential growth of the small and mid-sized firms, which on a year-on-year basis outgrew the average of the industry's big four. For the December quarter, the average profit growth for the top four IT firms — TCS, Infosys, Wipro and HCL Technologies — stood at 16.52 per cent over the corresponding period last year, while their revenues saw a healthy 30.43 per cent, aided by a weak rupee. An average of 10 small and mid-sized firms reported a year-on-year profit growth of 45.46 per cent for the December quarter while revenues saw a 36.95 per cent increase over the corresponding period last year, ahead of the larger firms. The 10 firms that have reported their numbers till date are Tech Mahindra Ltd, MindTree Ltd, Polaris, Sonata, Mastek, Sasken, KPIT Cummins, NIIT, 3i Infotech and Zensar. However, on a sequential basis, the average net profit for large firms grew by 7.37 per cent, while their revenues grew by 4.63 per cent. The small and mid-sized firms trailed their larger counterparts by a huge margin as their average sequential revenues grew by a per cent, while they reported a negative profit growth of 13.55 per cent. Analysts said the impact of the global meltdown will further intensify for the smaller vendors, who depend highly on fewer clients for a major chunk of their business. "In case one of their clients becomes weak, the impact will be significantly higher, which increases the risk factor," an analyst said. Challenging times Stating that next two years were going to be challenging for the global companies, who will limit their spending on technology deployment, analysts said such a situation would lead to vendor consolidation. "Typically, in a vendor consolidation exercise, the larger vendors will gain while the smaller ones will lose out, mainly because of the scale issues," an analyst said. Amidst a deteriorating pricing environment, wherein clients are asking for price cuts ranging from five to 20 per cent or more, the smaller companies with a lower bargaining power will be at a greater disadvantage, the analyst added. http://www.thehindubusinessline.com/2009/01/30/stories/2009013051040700.htm --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [email protected] For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en -~----------~----~----~----~------~----~------~--~---
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